The union will investigate if the three countries are illegally selling steel wire rod at below-cost prices that damage European manufacturers.

9 May 2008

BRUSSELS - The European Union said Thursday it would investigate whether China, Moldova and Turkey are illegally selling steel wire rod at below-cost prices that damage European manufacturers.

The EU can slap trade charges on imports for up to five years if it finds they are being dumped on the European market in violation of global trade rules. Any hint of sanctions would come in February at the earliest, after officials can make recommendations and EU governments decide whether to take action.

Chinese steel sales to Europe almost doubled last year, pushing down European prices and triggering complaints from the European Confederation of Iron and Steel Industries, or Eurofer. The EU's executive Commission said a 25 March complaint from Eurofer gave evidence of surging imports from Moldova and Turkey as well.

The new trade investigation will focus on wire rods used in construction that were imported from 1 April 2007 until 31 March.

''It is alleged that the volumes and the prices of the imported product have ... had a negative impact on the market share held and the level of prices charged by the (European) industry,'' the Commission said in the EU's Official Journal.

The investigation will compare European steelmaking costs with those in Turkey to help determine if that country's exports undermine market prices.

But the EU does not recognise China or Moldova as market economies, since state subsidies such as low rents or cheap power may affect production costs. So it will instead compare European figures with those of another fast-growing developing economy, in this case Brazil, unless Chinese and Moldovan steelmakers can prove their governments do not subsidise them.

The EU already has launched two other investigations, looking at imports of stainless steel cold-rolled flat products and hot-dipped metallic coated iron or steel flat-rolled products.

China supplies about a third of the EU's steel imports, far more than suppliers in Turkey, India, South Korea and Switzerland. Europe is China's largest trading partner, and it is importing more steel as an economic boom in 2007 led to more building construction and machine and car manufacturing.

EU officials warned of a protectionist backlash if China does not open up more to European exports. They have asked Beijing to change a system that keeps the yuan undervalued, giving Chinese exporters an unfair price advantage and adding to the country's surpluses.

However, Europe's slowing growth and Chinese export controls have caused imports to fall by a fifth from November through March, compared with the same period a year ago, EU statistics show.

As a result Europe's two biggest steelmakers, ArcelorMittal and ThyssenKrupp AG, said they expected strong demand and higher steel prices in 2008.

Eurofer's member companies together employ 372,000 people and turn out 200 million tons of steel a year - making a combined annual turnover of EUR 138.5 billion.

[AP / Expatica]